Several responses:
First, you make the mistake of using "logic" and "Iraq" in the same thought. They have a history of illogical warfare.
Second, Iraq can hit Israel (and wants to), but not us.
Third, Iraq knows they'll lose if we do invade (which I don't think will happen, but let's run with it). They'd launch on Israel exactly because they hate Israel so badly, and before we can get to their missiles.
Fourth, anybody's attack on Israel will be seen as a green light for all other Arab states to attack Israel. It might well ignite a regional war against Israel.
Fifth, an attack on Israel, coupled with the likelihood of U.S. assistance to Israel, causes a cessation of regional oil exports to the U.S.
Sixth, it's a wedge between us and Europe. They get to choose between Middle-East oil, and support of the U.S. France, for one, has not been shy about thumbing their noses at the Iraq embargo.
There's more -- but you see that it makes sense.
Egypt will sit it out. Jordan will try to keep low. Syria can't afford to attack. Who else is there to join Iraq?
Palestinians? They won't like this any better than Jordan does.
Saudi? Would not be in their interest.
Terrorists from their lairs? Probably, but they don't have the manpower or materiel for actual war.